If $1200 is invested at a compound interest rate of 10% per annum, what will be the total amount after 3 years?

1 question

1 item

Q: If $1200 is invested at a compound interest rate of 10% per annum, what will be the total amount after 3 years?

Solution: Total Amount = 1200(1 + 0.10)^3 = 1200(1.331) = 1597.20

Steps: 9

Step 1: Identify the principal amount, which is $1200.
Step 2: Identify the annual interest rate, which is 10%. Convert this percentage to a decimal by dividing by 100, so 10% becomes 0.10.
Step 3: Identify the number of years the money is invested, which is 3 years.
Step 4: Use the compound interest formula: Total Amount = Principal × (1 + Interest Rate)^(Number of Years).
Step 5: Substitute the values into the formula: Total Amount = 1200 × (1 + 0.10)^3.
Step 6: Calculate (1 + 0.10), which equals 1.10.
Step 7: Raise 1.10 to the power of 3: (1.10)^3 = 1.10 × 1.10 × 1.10 = 1.331.
Step 8: Multiply the principal amount by the result: Total Amount = 1200 × 1.331.
Step 9: Calculate the final amount: 1200 × 1.331 = 1597.20.